Intellectual Property Rights - Who owns the software?
Engaging a third party developer or software company to develop a website or application brings up the question 'who owns the software?'. Software development is covered by copyright law, this guide sheds some like on the topic and what you need to know about your intellectual property rights.
Software is covered by copyright
Generally, software is protected under copyright law. When a software developer writes any code they retain the ownership or copyright of the software. The owner of the copyright can then:
- Licence the copyright to others for use under certain terms and conditions
- Transfer ownership to another person or company, as agreed under contract
When thinking about copyright and IP rights, it shouldn't just include code. It should cover designs, wireframes, documentation, diagrams or any other asset created by your developer or software company for you.
What copyright does my software contain?
Broadly speaking your software may contain other smaller software packages to provide specific functionality to your application. These packages are written by third parties and are used to provide features or functionality common to many software applications, this includes open source software. They may be used in your software to lower your costs and speed up development time.
These software packages can come under:
- Third party software
- Developer IP
- Project IP
Third party software
Your developer may use software developed by third parties in your application or website, including open source software. Copyright for these cannot be assigned to you and your software should operate within the terms of the license for their use. You should ensure your developer provides you with a full list of all of the software packages used and that they are meeting all of the terms associated with them.
Your developer should provide you with a warranty that they have not infringed on a third party's IP when creating the software and provide an indemnity with monetary protection for any third party actions taken against your use of their software.
This is any original software code that is being written specifically for your project that is not third party or developer IP. If you wish to have ownership of IP transferred to you this is the IP that will be transferred. Ideally, you will have an agreement at the outset of the project detailing and confirming this IP transfer, as the ownership will otherwise be retained by the 'creator' or developer.
Copyright and your development company employees and contractors
The copyright for any code written by an employee of your development company will automatically transfer to the company on creation. If the company engages with outside contractors the copyright will be owned by that contractor, unless there is a written contract to assign rights to the company on creation.
You should ensure that your software company provides warranties that they are entitled to assign IP rights for all developed software.
When to have the conversation about copyright with your development team
At the very beginning of the project, before engaging with your developers, decide whether you want to license or own the IP. You will need to bear in mind that pursuing IP ownership may be more costly than licencing.
Outline your IP requirements in your initial discussions with your team and ensure these are detailed in your contract. Seeking professional legal advice when negotiating your contract is good practice.
If you already have software and never discussed IP rights, now is the time to initiate this discussion and agree licensing or IP assignment. Waiting until a change in circumstances, e.g. selling your business, change in ownership of the development company or a change of working relationship, can be time consuming and costly.
Considerations when engaging a software development company
Copyright law doesn't prevent someone reverse engineering your software or replicating your software product with their own original code. You can protect your ideas and brand via NDA’s and contractual obligations about how data is shared and managed by your development company.
Ensure you have a software development contract in place. The contract should be reviewed by your legal team and with reference to IP should cover areas such as:
- The software company has the authority to assign the IP rights and that any contractors used will assign rights to the software company.
- An outline of all third party IP as well as developer IP. And that the software meets the terms assigned by their licences.
- Warranties that the development company has met all IP terms for all third party software used and should include financial penalties to cover any legal actions taken against you by those third parties.
Deciding how you want to manage copyright and IP rights for your software is something you should consider at the start of a project. Engage with your software company before any work has progressed to agree licencing terms or IP rights assignment. Finally, having a written contract between both parties on what has been agreed will ensure there are no issues with ownership of the code later on.